What to Consider When Purchasing Liability Insurance

One of the biggest nightmares a business owner can face is suffering financial loss due to unexpected circumstances or events. Natural disasters, personal injury claims, service mistakes, and other unforeseeable experiences can devastate and permanently close your company. 

Fortunately, commercial liability insurance offers many options to protect your future from the risks of running a successful business. But, before you buy, you need to understand what type and scope of coverage will provide the best protection.

Types of Business Insurance

No business insurance policy is equal. When researching coverage for your company, you will need to consider many different factors, including:

  • Your industry
  • Type of assets requiring coverage
  • Where you operate your business
  • Risks associated with your line of work

Below are the most frequently purchased liability coverages for business owners: 

General Liability 

This coverage is a must for any business to defend against personal injury claims brought by a third party. In addition, claims involving property damage, defamation, and even copyright infringement fall under this policy type. 

Commercial Property 

Whether you own your office or rent it, protecting your equipment, workspace, inventory, and other property related to your business is vital. If you own your office building, this coverage compensates for damage caused by vandalism and mother nature. 

Business Owner Policy 

Many insurers offer a more affordable combination of general and commercial liability coverage. These policies address the most common risks your business might face under one policy. It’s also possible to add additional insurance, such as professional liability or fleet protection.

Professional Liability 

This policy is essential for companies that provide professional services, such as hairdressers or doctors. When mistakes or an oversight occur, a customer may file a claim for damages. The cost of professional liability coverage is worth every penny in this situation.

Business Interruption

This insurance is often included in BOP coverage to cover the financial losses suffered if your business must close due to events beyond your control. 

Cyber Liability

Data security breach protection is a top priority and legally required for many companies in the medical industry or those that overlap with it. However, even if your business doesn’t operate in this sector, when hackers compromise your network and steal client information, the damage your customers suffer is on you. Cyber liability coverage absorbs the legal costs of defending against these claims.

Commercial Auto 

Much like personal car insurance, a commercial policy covers everything from property damage and injury claims to legal fees incurred from these incidents, but on a larger scale. This means your entire fleet, multiple drivers, and your products in the vehicle receive protection.

Hired and Non-owned Auto (HNOA) 

If your company relies on employees using their personal vehicles, or you rent your fleet for business purposes, you need this additional insurance. This ensures that autos you don’t own but rely on for your daily operations have adequate coverage.

Workers’ Compensation 

For most businesses throughout the United States, workers’ compensation is legally required. If an employee gets injured on the job or develops a work-related illness, this coverage protects you from the expensive financial burden of medical costs. This also protects you against employee lawsuits alleging negligence caused their injuries.

Know Your Business Risks

Every industry has its own unique liabilities that business owners face every day. For example, an accountant who makes a critical mistake on a client’s tax return could get sued for this oversight and rely on their professional liability insurance to handle the legal fees and financial damages. 

Or, if you own a bed and breakfast, and your guests get sick after eating a meal you provided, a product liability policy could step in to deal with any lawsuits that might arise.

If you are new to your market and unsure of all the risks you could face, talk with an experienced insurance agent. They regularly help business owners determine appropriate coverage.

Weigh Policy Premiums and Deductibles Carefully

Insurers require policyholders to pay a yearly or monthly premium, plus a set deductible if a claim occurs. You have to pay this agreed-upon deductible before your coverage kicks in its share of the costs associated with claims. How much this amount will depend on the premium you pay. Remember, the higher your premium, the lower your deductible, and vice versa. 

Before opting for a lower premium payment each month, carefully consider if the higher deductible will be something you can afford. If you can’t pay this amount when filing a claim, your insurer could deny your claim. Therefore, choosing a deductible payment you know will always be affordable is always best. 

Don’t Insure Your Company for the Bare Minimum

The cost of your business insurance will depend on the coverage limits you set when creating your policy. It may be tempting to go with the minimum to save a few hundred dollars a year, but these early savings could cost you thousands later. 

For example, suppose your bakery gets sued for nuts in a cake recipe causing a severe allergic reaction in a customer who ate a slice. Even if you can prove they knew the complete list of ingredients, and the suit gets dismissed, you have legal fees, reputational damage, and have to close temporarily. Your insurance can absorb these costs, but only to the policy limits. So, if you only had $25k in coverage and losses total $35k, you’re out the remaining $10k. 

Research Business Insurers Before Buying

To get the best possible insurance coverage for your company, you also need to consider the insurer. While the premiums, deductibles, and coverage may seem stellar, what about customer service and claim processing? If you can’t file a claim without a hassle or fight to get the coverage you paid for, that insurer may not be the best choice.